$50 million more for Twitter piles on pressure to profit

Thanks to two previous rounds of funding, microblogging startup Twitter has …

Twitter, the microblogging service that is spreading like wildfire, has secured over $50 million in its third round of funding. Strangely, the company was not even looking for the money, but news of such a large sum is placing even more pressure on Twitter's plans to begin generating revenue. The service has become everything to everyone—a microblogging platform, a customer service hub, a replacement for chat and e-mail, a bite-sized newspaper, and even a Pirate Bay trial translation service—so, naturally, everyone is waiting to see what Twitter's first major step into the prime time will be.

Twitter's latest funding comes from Benchmark Capital and Institutional Venture Partners. According to the company's announcement, though, Twitter was not even in the market since there was plenty of cash left from the $15 million it raised last May. The company is not generating any of its own revenue yet, though ironically, a growing number of third-parties have cashed in by selling applications or accepting donations for services that work with Twitter (in particular, iPhone clients and sites like Tipjoy that allow users to donate money to friends or organizations).

Still, with everyone from President Obama to Shaquille O'Neal contributing to a 900 percent growth in active users over the last year, Benchmark and IVP clearly must see an opportunity for big ROI.

No one at Twitter will discuss revenue ideas with any detail beyond some vague statements from wonderfully named co-founder Biz Stone about the value that exists for businesses and organizations from using Twitter.

Each time the topic of Twitter and revenue makes its rounds through the media, Stone's statements lead to typical speculation around basic approaches, such as charging businesses for using the service or access to live data from search.twitter.com. Heavy users, including early adopters and entrepreneurs, have even been clamoring for some kind of paid pro account that allows for things like visitor statistics or private groups. Stone told Ars in a brief interview that, while "we think there are possibilities for businesses, it could very well be that general users will find some value in our offerings too. This all remains to be seen."

"We hope to begin iterating on revenue products [in 2009]," Stone has said in the past, though he also says that "Twitter will remain free to use by everyone—individuals, companies, celebrities, etc."

As pressure grows on Twitter to mature into a profitable startup, though, the line between generating revenue and not killing the buzz for existing users by introducing fees for existing or new services will grow thinner. When Ars asked Stone how the company is taking all this pressure, he replied, "We hope folks are eager for us to begin generating revenue because they want to see Twitter succeed." At the same time, however, "We're inspired by all this goodwill but we still need to take our time and do things right."

Since launching in mid-2006, Twitter has grown rapidly while gaining new features and a slew of third-party applications that allow for richer experiences, keeping track of hot topics, and visualizing statistics and usage data. Twitter does not share absolute numbers on how many users it has worldwide, but it is estimated to be in the high seven figures (it is probably well into the eight figures now, thanks to last year's aforementioned growth percentage). Stone did tell Ars that 50 percent of users follow at least 10 people, are in turn followed by at least 10 people, and that over 90 percent of users leave their updates open to the public. That's a lot of data generated by users' constant answers to Twitter's inviting and telling tag line: "what are you doing?"